Blockchain - intro

Blockchain is a decentralised ledger technology used by a business network to securely exchange digital or physical assets. Each member of the network is granted access to an up-to-date copy of this encrypted ledger so they can read, write and validate transactions. Once a transaction is validated using a consensus process, it's instantly committed to all ledgers in the network.

The net result is faster, private, confidential and audit-able business-to-business interactions among suppliers, distributors, financial institutions, regulators or anyone wishing to make a secure exchange. Blockchain creates a permanent, digitised chain of transactions that are grouped in blocks and can’t be altered.

Some benefits of blockchain:

    Reduces settlement time from days to near instantaneous.
    Removes overhead and cost intermediaries.
    Reduces risk of collusion and tampering.
    Increases trust through shared processes and record keeping.

1) One of blockchain's main benefits lies in its transparency, as the aforementioned ledger functions as a living, breathing chronicle of all peer-to-peer transactions that occur.

2) Each time a transaction takes place, such as one party sending bitcoin directly to another, the details of that deal - including its source, destination and date/timestamp - are added to what is referred to as a block.

3) This block contains the transaction in this example along with other similar types of transactions that have been recently submitted, usually within the past ten minutes or so when you're dealing with bitcoin in particular. Intervals may vary depending on the specific blockchain and its configuration.

4) The validity of the transactions within the cryptographically-protected block is then checked and confirmed by the collective computing power of miners within the network in question.

On an individual basis, these miners are computers which are configured to utilise their GPU and/or CPU cycles to solve complex mathematical problems, passing the block's data through a hashing algorithm until a solution is found. Once solved, the block and all of its respective transactions have been verified as legitimate. Rewards (bitcoin, in this example) are then divvied up among the computer or computers that contributed to the successful hash.

5) Now that the transactions within a block are deemed valid it is attached to the most recently verified block in the chain, creating a sequential ledger which is viewable by all who desire.

This process continues in perpetuity, expanding upon the blockchain's contents and providing a public record that can be trusted.

In addition to being constantly updated, the chain and all of its blocks are distributed across the network to a large number of machines.

This ensures that the latest version of this decentralised ledger exists virtually everywhere, making it almost impossible to forge.